It's the age old debate. Should you invest in solid bricks and mortar, or retain the flexibility and relative freedom from responsibility that comes with rented accommodation?
Monthly cost comparison
According to The Office for National Statistics 2013 Family Spending report, renters spent an average of £136 per week (£86.40 if benefits are deducted) on rent in 2012. Homeowners, meanwhile, spent an average of £138.60 on mortgage repayments (including interest and protection premiums). So renting is, on average, slightly cheaper. Of course, overall expenditure is more complicated. The average total weekly expenditure of a renter was £464, compared to £999.30 for mortgage holders.
This difference relates to three big variables: the number of people in a household (owned averages 2.8, rented 2.3), average incomes (higher in homeowners), and peripheral costs. These variables make a fair comparison difficult, but we can look at how the costs add up for each household type.
Maintenance
Insurance expenditure remains one of the biggest costs, and this is certainly more costly to the mortgage holder, who is liable for home insurance. Renters, on the other hand, only have contents insurance to consider. In total, a mortgage holder spends an average of £5.10 a week on structure, contents and appliance insurance. Contents alone averages £2.40, and appliances £0.10. What's more, outside of insurance costs, homeowners still spend around £6.70 per week on property maintenance, with central heating repair (which renters aren't liable for) topping the bill.
Although mortgage holders undoubtedly spend more on maintenance and repairs, renters shouldn't assume that they are free of all responsibility. Maintaining a property involves both the owner and occupier (the exact division of responsibility is listed in The Landlord and Tenant Act 1985), but basic cleaning, gardening, keeping drains unblocked and changing fuses and light bulbs are all the responsibility of the tenant. To get a clear view of costs, it makes sense to use money management software to monitor exactly how much you're spending.
Benefits
The final thing to consider is flexibility vs. investment gains. Moving house is no mean feat with a mortgage. While both groups share the expense of removal vans and days off work, the contract and agency fees paid by renters pale in comparison with the cost of buying a new home. Moving mortgages can push up interest rates, then there's Stamp Duty, as well as valuations, surveys and condition reports which can easily cost upwards of £2,000. You can use tools like Nationwide's cost calculator to see how much your move may eventually mount up to.
The flip side is the potential for property prices to rise. Renters are protected from market fluctuations, but that means only mortgage holders are currently benefiting from an average annual price rise of 9.4%. So a house worth the UK average of £250,000 would have gained £23,500: which dwarfs the savings made by renting.
Overall, it seems that, although renting is certainly the route to spending less, even an average property investment can save money at current price growth. But to get a true view of what's best for you, rather than relying on averages, take a look at our free Money Dashboard budgeting software.
Posted by Marc Murphy, Marketing Manager at Money Dashboard.
